Yeah, the bastard definitely cut off Theon's junk. GRRM never says it outright, but he implies it heavily several times (i.e. Theon being embarrased to be seen naked, mention of that other thing he cut off as quoted above, etc.), but the clincher was when he couldn't service fake Arya because he had no.... and had to use his mouth instead.

I'm curious how they will handle Theon's arc the next two seasons since he was a huge part of this last season, but he doesn't appear in books 3 and 4 at all.

Totally forgot about that part. More likely buried it in the deepest recesses of my mind. *curls into fetal position holding junk*